EP 340 - Ron Johnson, the Man Who Built the Apple Store

Welcome to the Jason and Scott Show, your source for the latest news and trends in the e-commerce industry. Featuring host Jason Retail Geek Goldberg, Chief Commerce Strategy Officer of Publicis, and Scott Wingo, co-founder and CEO of ReFiBuy. Here are Jason and Scott. Welcome to the Jason and Scott Show.

This is episode 340 being recorded on Friday, June 19th. I'm your host, Jason Retail Geek Goldberg, and unfortunately, Scott had an unexpected emergency and is unable to join us, but we have a very special guest in his place. Regular listeners of the podcast will know we are unapologetic fanboys of Apple and awesome retail experiences on the show. This year marks the 50th anniversary of Apple, so who better to help us celebrate than the actual creator of the modern Apple Store concept, Ron Johnson.

Welcome to the Jason Scott Show, Ron Johnson. Hey, it's great to be here, Jason. Thanks for having me. And it's a big year for Apple.

You know, the 50th year for the start of the company, but it's also the 25th anniversary of the year we opened the first store. You know, so that's amazing. That was Tyson's Corner, right? Was that Tyson's Corner?

Yeah, Tyson's Corner in Glendale opened the same day, May 19th, 2001. That is amazing. It kind of dates me because I do remember a world without Apple stores. It's sad to think I've been doing this so long.

You, of course, were a very young man when you started that first store. And Ron, I'm super excited because I understand that you have written a book called Shop Different that's going to release this September, which is coming fast, September 22nd. Why did you decide to write a book? What's the thesis of the book?

Yeah, well, I wasn't going to write a book, but it turns out there's this case study that was written at Harvard Business School that's used by almost every business school. And to this date, it's Harvard's, according to the school's, most popular first year case. And I've gone back to the school a couple of times and talked. And it's just packed with lessons.

And that case looks at my career from Target, Apple, and JCPenney and asks the questions, what worked at Target, what worked at Apple, and what happened at JCPenney. And as I thought about it, I said, you know, the way to give back is to really share the inside story of all of those. And after a lot of time, I decided, you know, I'm going to write a book. And I found a great person to help me write it.

And we've been working on it for three years. And HarperCollins is publishing it. And it comes out September 22nd, this September. And I think it's a really beautiful book.

Well, we are all really excited. Obviously, everyone that is generous enough to listen to this podcast is someone that loves retail. And this is unquestionably going to be one of the must-reads for us this fall. So thank you very much for writing it.

We'll double-click on it a little bit more. But one of the ways we always start the show, and it's kind of a perfect segue, is kind of understanding the background of our guests. And so we alluded a little bit to Target. Is that where you started your retail career?

Yeah, I did. I grew up in the Twin Cities and went to Stanford Harvard Business School and then decided coming out of business school, I didn't want to go into investment banking like everyone else. And I had offers to do that. So I want to go into retail.

But you got to remember, your listeners will know this. The 80s were the greatest period of retail innovation of any decade in the history of retail. And just like venture capital today is funding AI, venture capital is funding retail growth. You know, 84 is when Mickey, you know, repositioned the gap.

And that's when the Limited started to open all their stores. And that's when all these big off mall, big box stores started to come out. And when the Outlet Center was invented and on and on. And so the 80s were a big time for retail.

So I said, I'm going to join that parade. And I started at a division of Target called Mervins, which was their most successful strategy at the time. And I started unloading trucks down in Glendale, California. Yeah, I do feel like that was a golden age of retail, although it's always a golden age.

There's always cool stuff happening. But I'm going to say the vast majority of great people we get into retail, especially back then, were not coming from Stanford and Harvard. So you were probably a little bit of an outlier with the super fancy degree. So we're grateful that you did that.

It's maybe a little more common path today. And I've spent a lot of time walking the halls of Target. And one of the things I hear a lot about your tenure there is you were intimately involved in the Michael Graves deal, which I would argue is seminal at Target. Can you tell our listeners a little bit about that?

Yeah, so it's interesting. Just a quick, this will be interesting. Yeah. Yeah.

You know, there were, when I started my career, there were 13 regional discounters. You know, Walmart started in Vendonville, was doing rural stores, and Target was in the Midwest. And wherever you're from, there was a regional discounter, just like there were department stores that were local. And by the 90s, it was pretty clear that only three were going to survive.

And that was Walmart and Target. And then Kmart still had some life left at the time. But Target had the fundamental challenge of how do we beat Walmart? Because in the 90s is when Walmart started to open up in suburban areas.

And Walmart had a significantly lower cost structure. So Target was known for hip fashion. But the problem is, you know, fashion is you get a good markup. But by the time you mark it down, you don't make much more than you do on basics.

And so I had this idea that Target should come up with a third category, which was design. Design would let you get the markup of fashion. It's unique product. But design products should be in the assortment for a decade, not a season, like apparel can be.

And so we launched a partnership. It was the first retail collaboration, believe it or not, ever. And these are commonplace today. But we went on and got Michael Graves to design home products for Target.

That was my idea, my initiative I led with the team. And it just turned out to be fabulous. you know the 90s had gone through a period of design it was the decade of design and it was happening the volkswagen beetle you know johnny and steve did the imac in 98 when that launched you know on and on and on it was a decade of design and we caught the wave at target and during my time at target from 90 to 2000 the stock went up 12 times yeah good yeah yeah yeah hopefully you you got to hang on to some of that equity but that to me that Michael Graves collab started this, obviously it started collabs across all of retail, but particularly Target, it started this whole surprise and delight thing that Target was from.

Well, that's when, you know, Target, you know, they had to get people to, part of it was, you know, there was a lot of status in the 90s about where you shot. And people would whisper to the friends, oh, I got this at Target. Yeah. But when we did design, it was legitimate.

And people started to shout, look what I found. and people would go on these target runs to see what was new because we were really really exciting merchandise some was designed by us some was from europe you know all these things we were doing and then you know of late unfortunately target lost its way a little bit you know hopefully target target finds its way back um and the stock price has gone up yeah yeah And I think they will. But that was a great period for Target. And I love being a part of it.

Yeah, they did have a good quarter last quarter. So we're hoping that's the beginning of a turnaround for them. I think that's funny. It used to be that you were kind of quiet about your patronage at Target.

But during that era, it became Target. And I think of you and Michael Francis as really kind of making it cool and hip to shop at Target. So Michael did Target had great marketing. You know, there's a guy, John Pellegrin, who did an amazing job.

And Michael was at the department stores and he came to Target and did a fabulous job building out the Target bullseye. That it became one of the most recognized symbols, you know, in in in business, not just in retail. Yeah, it's this whole story is going to come full circle because he's he's at the gap now. um so so what what i'm curious and i honestly don't know the answer to this is how how did you go from target to apple were you recruited were you looking for your next challenge interesting i got a call one day from a recruiter and he said ron remember in 1991 he said you were 20 How old was I?

I was in my late 20s. And he said, you know, there's a guy named Mickey Drexler wants to open up a new concept called Old Navy. Would you like to talk to him about running it? And I said no, because I was early on in my career at Target and wasn't ready to move.

And he said, you know, you turn that down. Look at how Old Navy's done. I've got another one for you. And he said, Steve Jobs wants to open stores at Apple.

he asked me to look for who's that guy doing all the design work at target because steve loved design and so i decided to go out and meet steve and i met him we interviewed for three hours the first night and i walked away saying i have to work for this guy you know it's one of those moments and apple was struggling you know it wasn't doing well target was on fire people couldn't understand why I would do that. And then a lot of my friends said, this was 2000. Ron, the dot-com boom is what's happening in retail.

Don't go to Apple. You know, go to one of the dot-coms, start a dot-com company. I said, no, no, I want to go to Apple. I believe in physical retail and I believe it's a great brand.

And if we do the stores right, it can really make a difference. Yeah. So I joined Apple. That's amazing.

And I do think it's, in fairness, In hindsight, that seems like a no-brainer decision, but people have to remember that at that point, it was not clear that Apple was going to be the runaway success that they'd become. And it for sure was not clear that manufacturers should own their own retail stores. Well, no one thought that was a good idea. Well, remember back in 2000, the PC had 95% share.

And who was the big PC one? Dell. Dell, yeah. Direct-to-consumer online.

They had built out online shopping starting in 94 or so, and they were just killing it. Yeah. But the reality is, it was selling mainly to business, not to consumers. Yeah.

But then Gateway had gotten up to 300 plus stores. And when we're going to open the Apple stores, they were folding. Yeah. You know, they closed down the year we opened our stores.

So people are going, what's Apple doing? Gate, they can't make money in stores. Dell's winning. Apple's got 5% market share.

and they're going to put stores and malls expensive real estate in those big stores these guys are crazy yeah yeah so i i could imagine some people were were questioning your career choices at the moment and then choices and my business strategy yeah mostly it wasn't wasn't just that apple was going to open stores it was that we weren't going to test it we were going to open them and we're going to do everything different yeah and the i i i'm trying to put myself in your shoes and i i literally can't do it but like you'd both to work with someone like steve would be like so exciting and such a privilege but it also would be quite frankly terrifying because he's he's famously fast sharp and not not very uh tolerant of people that that can't keep up that's true but you know that's one of the reasons i i wrote the book and one of the things i'm delighted with is i was able to portray the steve i knew and the steve i knew would be the same kind of person johnny ive knew and tim cook worked with you know steve was actually a great person to work with no one inspired you more taught you more helped you more and if you were one of his close, you know, I was on the executive team.

He was a great leader. He delegated better than anybody had ever worked with high standards, you know, and you know, he, you, it could be tough sometimes, but that's what you want. You want to work with people who are smarter than you, who stretch you, who challenge you. If you don't, you know, I think that's a big issue.

No for sure I I curious how like how did that work Like did was he super involved Did Did you have to build the concept store And did he get involved in approving it Like did you have to He was very involved He was involved in the things he loved So he cared about design. So he got involved with the development of the initial store. And from then on, he kind of helped with some of the big, like the Fifth Avenue store, the all glass cube. Yeah.

You know, but after that, he just delegated. He didn't get involved with the culture, the people who I hired. It was really his input was in the design of the store. And, you know, we had a lot of great conversations early on about conceptually how we were going to compete.

And those were really good conversations. Like he hated the idea of putting stores in walls. You know, but I said, Steve, your goal is to reach the 95% who don't use a Mac. they're not going to get in a car and drive 10 miles to a store you might get them to go 10 feet out of their way you know and steve once he understood that he said okay we'll be in malls awesome so you know and yeah so you're able to convince him he was open-minded yeah steve is extremely open-minded you know his strength is his ability to innovate through conversation You know, some people call it David White would call it conversational commerce, you know, but it's really a great conversation is when no one has an agenda.

They want the best idea to win. And you're both absolutely present. You're debating an issue. You're bringing your own personal geography to it.

And the best idea wins. and Steve never, never, never did something because it was his idea. It was only if he thought it was best, but he was very open to input. And there are many examples of that throughout the book.

That's gratifying to hear. I am curious, by the time you left, Apple stores were universally regarded as a wild success. And there are all these crazy stats about the revenue per square foot being like higher than Tiffany's and all it was at the top of the ecosystem. And, you know, they say imitation is the most sincere form of flattery.

Everybody, of course, was inspiring their new work based on the success of that store. I'm kind of curious, though, from you, from the horse's mouth, like what do you think about and what are you most proud about in that Apple concept? What do you think were, there was a lot of innovation in there, But what was the secret sauce that really caused consumers to resonate? The secret sauce is we created a place that people wanted to belong.

You know, the store, it was and it was interesting because it was the time the Internet when the Internet was all about a transaction. And if a store was going to survive the Internet, you had to build an experience. And so part of the benefit of the Apple store coming out at the time when the Internet was just taking off is they were our competitor. and we had to do something that they could never do you know and so ultimately what i'm most proud of i think is you know i was in the apple store in milan two days ago a beautiful store and the experience was fantastic and the store was essentially the same layout same vision that we established 25 years ago yeah with all the changes and that that's hard to do in retail to keep something vibrant and working.

But I think the strength of the Apple store has always been its people. You know, they're not on commission. They love people. They love serving people.

They're not in a hurry. You know, they take time to welcome you to the store, to get to know you, to find out what you're trying to do. And then they present a solution that's exactly what you need, not more than you need, that you can take home today, you know. And then the store's got great support after you buy, whether you want to learn more through classes and theaters, or you want to get help like in a genius bar.

But it just, it turned out it was just a well-conceived store that has stood the test of time. And when I left, you know, I think there were 370 stores open. We had another 50 in works. Today, Apple has 530 stores.

So in our first 12 years, we got about 80% of the footprint done globally. And, you know, in the U S you know, there's Apple stores within, you know, seven, a 10 minute drive today of 90% of the population. Yeah. So it's, it's, but I have to digress for one second.

When you walk into Milan, do, does anyone know who you are? Do people recognize you? They didn't this time. Okay.

But it's interesting. Most of the stores I visit especially in Europe people will recognize me yeah because you know they stay around a long time you know like I was in the niece store three weeks ago and I was having this girl I said you seem so familiar she goes Mr. Johnson I helped you five years ago I had forgotten but yeah that's amazing she's worked at that store since it opened 16 years ago yeah and in some ways I feel like that I know it's not directly analogous but the the evolution of consumer electronics in the U.

S. Like, you know, there was a time when there was this big battle between Circuit City and Best Buy and Circuit City was the commission based model. Best Buy was not. And obviously Best Buy won because they're here and Circuit City isn't.

But Best Buy was very low touch. Right. And and the the you know, there was huge turnover. And so then the Apple stores emerged and they're they're non-commissioned but much higher touch.

And, you know, they certainly you invested a lot more. You know, Best Buy under Herbert Jolie, Mr. Jolie did a great job. oh yeah he had a book yeah what i found kind of funny is our our two-word goal for the apple store for service was to enrich lives and in 2012 or 13 best buy said our goal is to enrich lives yeah but they started to put in store within a store throughout the store you know apple was probably the first one and they have many of those and those are sometimes staffed by partners you know So it's become a great place to buy consumer electronics.

Yeah. And I'm a great admirer of Best Buy. They've survived. It's a difficult category, but they've done a great job.

Yeah. No, I totally agree. And I am also a Best Buy alum. So I appreciate that.

It is funny, though. It was almost a self-fulfilling prophecy. Part of the reason that we had to open shopping shops at Best Buy is we used to have this great traffic driver in the middle of the store called Music. And people used to buy music on these plastic circles.

Um, and, uh, uh, Apple may have had a role in making those plastic circles a little less popular. And so we, we had to find alternative uses for some of the, that, that excess footprint in the middle of the store. That's so funny. Yeah.

That's true. Yeah. You know, my moniker is retail geek and I was accidentally involved in, in Best Buy's acquisition of Geek Squad, um, which was founded by a, an entrepreneur in, in the twin cities. That was, that was like 90, 1996.

Yeah. Robert, Robert Stevens. So history. Yeah.

I knew Robert. Yeah, Robert. Then he moved to the Bay Area. Yeah.

Later after he sold Geek Squad to Best Buy. Yeah. He would say after Geek Squad acquired Best Buy is how he would put it. He would say.

No, it's kind of funny because when I presented the idea of the genius bar to Steve, I first talked about we're going to serve people through a bar. Yeah. We're going to dispense advice just like a bartender dispenses alcohol. He goes, I like that.

He goes, what are you going to call it? I said, I'll come up with the name. I don't have it yet. So I called him up a week later and said, genius bar.

He goes, Ron, you can't call it that. And he said, because the people who are going to be behind the bar, they don't know how to talk to people. If you want to call it the geek bar, you can. Well, he wouldn't have known about the Geek Squad.

Steve wasn't in touch with that. Sure. But that, you know, it's interesting that that was the name that, you know, the original founders of the Geek Squad chose. Because that's kind of who technologists were back then.

And they were these people that love technology kind of geeks. And they spent a lot of time with themselves. And weren't great with customers, but they knew how to fix products. But we flipped that on its head and called it the Genius Bar.

And it's probably the most relevant part of the store to most people. I certainly would agree. It's a lot of pressure, though, to get a title like Genius in your title. Geek seems a lot lower pressure.

I will say, right. Can I explain to you why we did that? Yeah. Please.

You know, the key, you know, I really think people want to have meaning in their life. And when we were opening our first store, I said, think of the, I'm from Minneapolis. You know, we're going to have our first store at the Mall of America in Minneapolis. We're going to hire three geniuses, maybe it's four.

You have to be, you're going to be credit for being the smartest Apple person in Minneapolis and St. Paul. well if you love technology what a great job you are the smartest apple person in the state of minnesota you know and that gave people meaning and they'd stand behind that bar and they had to answer any question on the planet and they were proud that they could do that and they were proud that they were a genius at a genius bar yeah and that's just part of conveying meaning and that's really important to people who work in retail that that that seems totally fair and in that same era Robert and I were desperately telling everyone that geek is not a pejorative.

So that was kind of our, you know, still a negative thing back then. So I do want to touch on two things that are super interesting to me about the Genius Bar. I worked for a lot of retailers that opened stores and were inspired by Apple. And my hypothesis is they always got it wrong.

Like, of course, every attribute of the store contributes to the experience and the success. I'm not trying to say there's one thing that makes you success and one that not. But the things that people always noticed and tried to emulate are like negative space, wooden tables, better lighting. Right.

And those are all important things. I'm not saying they're not. But when I look at Apple stores and say, hey, here's why they stood out. Here's why they won the hearts and minds of their consumers.

Steve Jobs might disagree with me. It wasn't as much about those design elements as it was the service model, that you had more people per square foot, that you had those people well-trained, that you had the service in the Genius Bar. And so I always felt like all these emulators were emulating kind of the wrong parts of your plan. You're exactly right.

You know, when I left Apple in 2012, we had a million visitors a day to our stores. I think a million people a day came to the Apple store. And they came for, like we said, there were a lot of reasons to come. And it wasn't about buying a product.

It was so many other things. But, you know, the reality is most people, what they call innovation, is really improvement. Because when they do innovation, they go look at what someone else did and they apply it to their store or their situation. And the customer sees that as a copy.

It's good to do. But you never get it right. You know, Microsoft tried to open retail stores and they made, you know, they made the obvious so many mistakes. It's hard to it's not laughable.

It's sad. But, you know, they're the big gorilla and they go open a store right next to an Apple store that's the same size. So basically legitimized Apple. But they didn't understand what made the Apple store great.

You know, and it just felt different. and they never even got traffic in the stores. You know, you'd go by an Apple store and be packed with people and this company serving 90% market share had nobody in its stores. Yeah.

Yeah. I remember well. And they, I mean, they, they literally followed your footprint. I think the first Microsoft store was also in Tyson's corner.

So yeah, yeah. Funny, unsuccessful part. But when I look at that store, one of the things that I think someone may have had an idea before, but it had never been executed before. One of the things that was really interesting to me was mobile checkout, that we went away from a cash register and a line of people checking out to sort of checking out in situ.

Was that like an accident or was that a very intentional choice? It's a great part of the book, I think. We tell about all those innovations, but it was interesting because in 1984, when I was at unloading trucks, someone at headquarters said, I feel sorry for that Harvard MBA guy down there unloading trucks. Why don't we do a little write-up on what should we do with the cash wrap?

And I spent about three months studying the cash wrap. And I just concluded everyone hates everyone loves to shop nobody likes to check out It just a really terrible experience no matter what you do And so my dream was always to get rid of the cash wrap And in 2008, we did. And what was the amazing thing is we had technology. We basically turned an iPod Touch into a mobile cash wrap.

We gave one to every employee. And as the stores got really busy, you know, I remember the iPad launched. we had stores with 300 employees on the full each was a mobile cash round yeah which scales a lot better than some super expensive ncr point of sale there was no constraint we had no constraints yeah we were selling 300 ipads a minute can you imagine that no i cannot and other retail stores would have lines at checkout yeah we had lines outside the stores to get your hands on the product to try it we had no operational hiccups you know yeah that that's amazing no i was really proud of that yeah and then i feel like eventually you even expanded that to self-checkout so your app was also one of the first 2010 yeah 2010 we just said you know we got this app let's create an app put it in the apple's just let someone just scam the barcode and check out themselves yeah not a lot of people did it it's like most new technologies but in 2010 you could do that and i don't think you know mobile checkout really became a thing until the 2018 1920 period and now you got people like inditex and uniglo have the most amazing checkout experience i've ever seen yeah you know and yeah the world's changing no no no it's it's certainly having a moment now i i do a lot of work with our friends in bentonville and it's one of the most beloved experiences at sam's club is that scan and go.

And, and yeah, in my mind at all, it all started in, in those Apple stores. I remember when you first launched that, I shopped one of your New York stores, the, the one in the train station, is that unions? Yeah, Grand Central. Grand Central.

And it was such a surreal experience because already you made that store feel like part of the environment. It didn't feel like you were necessarily like walking over the threshold of a store, right? So you're kind of, you're, you're browsing, you see something you want, you, you scan it with your phone and you walk out. And And I literally felt like I was shoplifting when I left with my first Scantago purchase.

Isn't that great? Yeah, I remember. Well, you know, that was a real fun store because it turned out to be just a hugely successful store because so many people in New York, all the people from Greenwich and up north, are going through that train station every day. And they'd stop in to get help at the Genius Bar.

They'd buy their Christmas gifts on the way home. It was a great store. But you know what? It was the lowest cost store we ever built because you didn't have to touch the walls.

You couldn't touch the floor. we just put it in our little wood tables and a little lighting and we were good to go. Yeah. It's nearly a pop-up store.

Yeah. It's a beautiful store though. It's a beautiful building, beautiful space. Yeah.

Yeah. No, that was super fun. And then one other thing, and in my mind, this might've evolved a little more over time, but like, so one interesting thing when you do mobile checkout versus a traditional cash wrap is you kind of move from this adversarial thing where the customer's on one side of a desk and the The clerk is on the other side and they're taking money from each other. They're negotiating.

It doesn't feel like a collaborative win-win. You move to this shoulder-to-shoulder experience where two people are working together to solve a problem, which I love. And I feel like Genius Bar evolved to that over time as well. Like there may have been a time when people sat across from each other in the Genius Bar.

But over time, the Genius Bar moved to those tables too. They're bringing back, but some of their newer stores now, they're bringing back a bar. Okay. And I think what happened is, you know, and I've talked to them about it.

People like to walk in the store and know what's going on. And the challenge when you have a lot of tables with people sitting side by side, what are they doing? Where do I go? You know, because there's setup at those tables.

There's classes at those tables. There's genius bar at those tables. It's very flexible. but you lose a little bit of the understanding of what's being offered here, you know?

And so things evolve. Yeah. And so speaking of evolve, I am curious, and I'm not trying to throw shade on anyone, but like when you walk in an Apple store today, is there anything that's changed that you go, oh man, I wish we didn't cave on that? Or like, is there anything that bothers you at all in the current Apple experience?

Or are you? No, no, there's one thing we did, though, that I absolutely love that they eliminated is, you know, we wanted to find a way to create perfect placement where every product was exactly where it should be every time. And when the iPad came out, we created these beautiful acrylic displays. You might remember these with an iPad.

Yeah. There was a point of sale device and the products like the phones would be right attached to that. And we powered the phones through the acrylic display. And we just updated the software, but we could tell stories.

So if the store is busy, you could read about it right there. It's like going online and learning. You could check all the configurations, all the price points. And so we had really reinvented what I'd call point of sale, how you communicate to a customer shopping on their own.

And for some reason, Apple decided not to continue that. you know and i and i think it then it requires you when you're in the store on your own if a person's not there what do you do now with some products like a computer they put it on the screen but with the phone it's too small you know that was an interesting one to me yeah yeah that is i i do i think that in my mind and this maybe only a geek would notice this another innovation of the store with like you know traditionally you put product on the on the shelf and then you put merchandising around the product to try to tell the story.

And it's all static merchandising. And so you can't tell a super rich story. I would actually argue Bose was doing this for quite a while, even before there were Apple stores, but in the Apple stores, every device in that store had software on it to tell a story about that device. Like, like you kind of built the, the shopping customer experience into the device, which is one of the nice advantages when you're the manufacturer of the device um exactly and and so i do i think that no you're you and there's a that's a big part of the store because we delayed our first store six months because we went from the whole store was organized like a retailer run products and then it's a great story but steve decided he's going to reposition the mac as the digital hub and that means the mac is about not about the computer it's about the software that allows a digital device like a camera to become something you can create with you know and so then all the software got put on the computers and that's what people love they get on those computers to learn how to do something they'd never done before yeah you know and the stores came out when we were still in an analog world you know in 2001 98 of people owned analog cameras oh yeah they were still good they were walk into the grocery store to get their phone to go.

Yeah, it's a little known fact, but in the early days, a lot of people walked into that Apple store to get internet access. It was like the public library. They would sit on the devices and use the device for free and have internet access. And I think there's some really popular social creators that actually did all their content in the stores.

No, you're exactly right. No, even when Facebook came out, kids would come in there and that was the way they could do their Facebook thing because they didn't have couldn't afford a phone and they come use the Apple computers on but no we had someone write a book for 30 days and came into the Soho store I don't know how she wrote a book in 30 days it took me three years yeah but now it's 10 minutes with a robot but that's it yeah she just wrote a novel in the store and we let her do it that's amazing the thing is I always said good things happen when people come to the store and people would walked by the mall and the truth is apple was a free internet cafe yeah in 2001 2002 no one was buying max we no one understood why we were learning to sell them etc how to create an experience that we get someone to buy but the stores were packed with people on the computers yeah and they thought the mac was so fast and they didn't realize it was just high-speed internet yeah that's amazing but it was it was it's interesting yeah you know you you referenced 2001, I feel like you and I both had some novel experiences around the unfortunate event that year, which was 9-11.

On 9-11, I was in a conference room in Minneapolis with Jeff Bezos as Target was signing a contract to outsource e-commerce to Amazon, which would end up being an ill-fated decision. And so we were all stranded in Minneapolis with Jeff. He found better accommodations than I did, but for a number of days. And I understand you have a special memory of 9-11 as well.

Yeah, the same. It's just a really tragic day. But I was up early, as I always got up early, and I got an email about seven o'clock from Steve. And it said, in light of today's events, you know, you're welcome to stay at home.

And then he followed up with a note to me he said ron i know we have a meeting with your team at nine o'clock at the warehouse we're designing our store he says i personally would love to come in and be with people i said i'll be there too but i remember telling my wife said karen what happened today and we turned on the tv and we saw all the images of the tower yeah and so i spent that day with that morning for three four hours with steve and it was a day to reflect it was eerie i mean And, you know, Cupertino is right where San Jose Airport.

All the planes are coming. You're driving. There's no planes in the sky. It's quiet.

Nobody's on the roads. Nobody knew what was happening. That tragic day. Oh, my gosh.

It was also, you know, it's interesting to think back because that was the birth of e-commerce and everyone had to figure out what to do. But Target didn't think they had the skills to build their own site. so they literally farmed it out to amazon until 2008 yeah they you know and yeah they were not alone it was you know borders and toys r us and dick's sporting goods and lots of but uh yeah i i was both involved uh reluctantly in outsourcing it and then i was involved in bringing it back in-house a little later so it worked out you know i thought i had the most fun job in retail i think you had it you know all these cool no no no you you and i were in similar places you were just wildly more successful in each one of those places.

And now I know the secret. It's because you get up early and I sleep in. I feel like that's the path not traveled for me. I do want to do a hard pivot though, because there's a chapter of your career everyone's always super interested in.

It's a whole nother discussion point is at the peak of Apple's greatness, you decided to leave Apple and take on a new challenge. Yeah. Yeah. I was turning 50 and I had looked at my career in 10 year cycles.

I was at Target for 10 years. I've been Apple for 12 years. And I kind of asked the question, because opening Apple stores had become a hobby. I had such a great team, 60,000 employees.

I was just having the fun of imagining a new store, designing it, bringing it to life. They all worked. It really wasn't a challenge. It was just like recreational.

and and i i kind of felt like i want my favorite days were creating the apple store bringing design to target you know figuring out to resize kids clothes and and i wanted to have one more chance to do something really hard and this after he came around a couple of investors had taken a stake in jc penny bill ackman who's still quite famous most people probably know on this show and Steve Roth was running one of the large real estate funds, Vornado, and they wanted another board member.

So they asked if I'd do that. I met them. And then in the process, at the next meeting, the CEO, longtime CEO, a very nice man, got in a car accident. And it made the board get a little worried about succession plan because he was probably 66 anyway.

So they pivoted and said, Ron, would you be interested in running JCMoney? and I look back, you know, I'd started at Mervin's, which is a competitor of Penny's. You know, I'd been watching department stores my whole life. And I said, wouldn't it be a great challenge to try to see if the American department store can be reinvented, transformed?

And, you know I was led to believe that JCPenney wanted to do that You know it turned out I don think there was as much passion for change as I had And it was very difficult But I made a ton of big mistakes doing that It was the hardest year, 18 months of my life. I was situationally arrogant where I really believed. You know, I've been very successful at Target, Apple. And I think I believe that I could convince anybody that this is what we ought to do and let's go do it.

and it turned out the team wasn't ready for it. Our board wasn't ready for it. Our customers weren't ready for it. And, you know, I went from being kind of the top of the retail world to the bottom, you know, reputationally and all that stuff.

But it was a good learning experience. And I address it head out on the book, and I think people will enjoy reading that because it was a tough time for me. Yeah, I can well imagine. You know, as an independent observer, I mean, there's this debate we've had in retail for 6,000 years, everyday low pricing versus high low pricing, right?

And, you know, of course, the Walmarts of the world are famous for everyday low pricing. Before you came to JCPenney, they were one of the most extreme practitioners of high low pricing, right? And so there were tons of promotions. Oh, they were the most.

Yeah. I mean, the average item, Penny sold less than 1% of its merchandise at the everyday price. And the average item was over 60% off. And the company began with the golden rule where J.

C. Penney, James Cash Penney said, we will never offer a product on sale. Truth begins on the price tag. You know, look how that evolved.

But, you know, the reality is we all know today, everyday pricing won. Yeah. Now, there are people that look at look at what's happened to Ross and Marshall's and the off price industry that continues to grow. Yeah.

But it's everyday pricing. And they pretend it's 60% off, 46% of a department store. Well, none of this merchandise sold at department stores anymore. Yeah.

But it's an everyday low price strategy. Walmart's everyday price. Yep. Target's a large, you know, everything's everyday price.

Yeah. I do think the conventional wisdom today is everyday low pricing is a better business model. comma, if you're already high-low, it's very hard to roll that back. It's very hard.

It is. And JCPenney would be one of the top case studies of how that was, although not the only one. Macy's and others went through similar struggles. But, you know, it is interesting.

You know, our sales went down the first year because we just basically took off all promotion. Yeah. And our sales went down 20%. Yeah.

Our plan was to be down 15%. It was 5% worse because it's hard to predict these things. When I was at Apple in 2002, our sales went down 40% as we transitioned the operating system and our processors. And that was really comfortable for Apple because we knew that we had to get to a new processor family, get off Motorola, get to Intel, to get to the other side to continue to grow.

But in retail, people were saying, why would you fire your customer? yeah well we had no old customer we wanted to get young people to shop at pennies and to do that you know we had to get these new brands to want to come and we created a store with 100 store within the store it's kind of like best buy is today yeah and we're going to fill those with all these dtc brands that you know now all have big footprints you know look at warby parker look at vory look at all these people who are just winning through stores yeah and in in my mind And, you know, I think people look at your tenure at JCPenney and if they want to be really superficial, they're like, oh, man, he came in with the wrong strategy and the customer didn't accept it and fired him.

I look at that and I've worked with a lot of very big retailers. And what I've learned in my career is the hardest thing is not knowing what to do is very hard, but it's not the hardest thing. The hardest thing is the organizational change management. It's getting 1.

7 million Walmart associates to do their job differently tomorrow than they did it yesterday or any of those things. And so I don't think the data is there to say that any of your ideas of JCPenney were necessarily wrong. I think it was really hard to implement those ideas, and it probably required - No, the way I implemented it was a disaster. Yeah.

And if you look back, at Apple, I was the only retailer for a while. Then I built the entire team, and we created the store together. yeah so you didn't have to change that i didn't have the chance to i went to pennies the board wanted to go and i just said here's what we're doing yeah and that was bad the team wasn't ready for it they didn't understand it you know so it was there's a lot but there's a lot of good lessons oh yeah and that's that's you know why i wrote this book you know when i look back at my career you know when i was young you remember this there were people like tom tom peters oh yeah in search of excellence and there are all these great books we used to read Stephen Covey's books yeah you know and you know you read a book and you get one thought and you apply it to your work and it can change the game yeah yeah I think you know hopefully my book someone will read it and say I like how they thought about people I like how they thought about culture how they thought about real estate how they thought about design how they thought about change you know and hopefully people will think about it and maybe it'll give them a chance to do something different.

Yeah, I love that. And I'm sure that that will happen. We're coming up on time, but my listeners will murder me if I don't bring up two other topics. One is a debate we've been having for as long as the Internet's existed is the whole role of brick and mortar stores versus digital, right?

And we have this funny saying, the Internet saw buying but broke shopping. And there's a lot of people that say like, oh man, stores are done. I think Mark Andreessen at one point said that, you know, stores are going to go away. That hasn't happened.

The, I'm kind of curious where, where you sit, you lived through the whole digital revolution of retail. Like what, like are they? Well, it's not, there's not even a debate anymore. The answer is in front of us.

Yeah. Stores didn't win. Online didn't win. Omnichannel won.

Yeah. It just took time. You You know, today, 85% of revenue comes from, well, 70% of revenue comes from physical stores, 30% from online. But half of that is the online arm of a physical store like Walmart or Target or The Gap.

So there's only one out of $7 that comes from a pure play online store. And every online store has tried to open physical stores. Look at what Walmart's tried all these years. Or Amazon's tried all these years.

Amazon. Yeah. And they're now building a 250,000 square foot super center in suburban Chicago. I know.

I live in Chicago. I'm, I drive by. I'm, I'm super excited to see what they do with it. But the, the proof to me, the biggest proof point is if Amazon hurt any retailer, it would have been Walmart.

Yeah. Walmart was the low price category killer. They had everything in the physical world. And that's what Amazon became.

But Walmart today, it's stock prices eight times. Yeah. Now, it hit a trillion dollars recently. It was worth $130 million back in 2000 when the dot-com thing started.

Yeah. And so what truly happened in retail is retail got overstored in the 80s and 90s when there was abundant capital, like we talked about early. That's what people were doing. The only way to grow is to add more stores.

And if you weren't opening 10% new stores a year, there was a problem. We had overstored. When the internet came on, it took time for retail to learn how to do online shopping. Look at Target.

We talked about it. It took eight years until they brought it on their own. But eventually, they figured it out. Then they could reduce the over-storing.

They got to the right equilibrium. And now you're in a position where retailers are stronger. And customers sometimes go online, sometimes go to stores. But only channel is how we shop.

Yeah. That's just the way it is. So I think physical stores, actually, the online was the rebirth of the store and gave them a chance to rethink that whole customer experience model. But it didn't kill stores.

Stores have thrived. Amen. And it's just the fact that you can't argue about it. Now, stores did hurt small town.

Yeah. You know, where you couldn't afford, you know, people buy online. There's just not a lot of volume to support stores. Stores online hurt tired retail.

It always has. Yeah. Tired retail never works. But most of the great stores, look at the gap today.

The gap's on their way back at all their divisions, right? Yeah. It wasn't an online issue. It was a merchandising, a branding issue that Richard and team were bringing back.

And so the reality is tired retail doesn't work. Omnichannel does. No, I think that's very evident. And so then forecast that to the next thing.

All anyone wants to talk to me about these days is the robots, is AI, right? And so, you know, I started e-commerce in the 90s. We had to figure out card not present transactions because they were illegal. Now they're trying to figure out human not present transactions.

And there's a bunch of talking heads that are like, oh, man, the robot's just going to shop for us. We're going to stop shopping on our own. We're going to stop picking brands and going to stores. How do you see AI playing out and what will that add or subtract?

AI, it's just it's another technology. And technology has always helped retail. it's always out business. It takes a while to learn how to use it.

There's a lot of fear that AI is going to eliminate jobs, and it will, but it'll also create jobs. You know, it's so interesting. You read now, the jobs report the last three months has been really good. And you read about people like Block and, you know, Meta, laying all these people off.

That's big headlines. The reality is we're still hiring, and most companies are using AI in really smart ways. But with retail, you know, we're all starting to use agents to shop. Walmart's got the lead there, really doing a great job.

Amazon's trying there. They have an agent, you know, shopping thing. It's very slow and I don't think it's particularly good. I was playing around with it today.

But the world's changing. But I expect, you know, I really believe, you know, in a world of the world's gotten way too digital and the people in their 20s and 30s, they're joining running clubs and they're looking for human connection and you know they're the ones going back to stores and you know malls where i live stanford shopping center where people have been trying to put stores out of business for 30 years is the hardest parking place in the valley you know so i just think people are looking for connection and you know hopefully ai because we be more efficient at getting general knowledge will let us spend more time connecting you know is what I'm hopeful.

Yeah, I think I share your hope. And I think there's reasonable optimism that that's how it's going to play out. Yeah, and I just did build off that real quick. I read an article last week.

Satya Nadella was talking about where he sees AI going. And he talked about human capital and he talked about, what was his word for it? Token capital. Yeah.

That's the same as physical retail and digital retail. omni-channel is the intersection of physical and digital what sati is saying is really it's almost like there'll be this new category called omni-intelligence which is agentic intelligence it's general knowledge applied with human knowledge and the bringing of that together is really the future i think and i think we're going to rely more and more on people's own lived experience and we're going to be bringing our own personal geography to work where we grew up the lessons we learned, and that's what's going to matter.

That's where the value will be. And how you bring that together with knowledge you get from AI. It's not going to be AI telling me what to do. It's how it enables you to think differently.

Yeah, I think that is a really interesting way to think about it. And I think that's going to be a great place to leave it because once again, we have used up all our listeners' time, but this super interesting conversation. I'm so grateful for you taking the time. I'm so grateful for you writing the book.

And I'll remind listeners, Shop Different is coming out on September 22nd, and we'll have links in the show note to buy it. But Ron, thanks very much for sharing some time with our listeners today. The pleasure of mine. Thank you.

Yeah. And until next time, happy commercing. You've been listening to The Jason and Scott Show. For all the latest news and trends on e-commerce and shopper marketing, subscribe to us on iTunes or visit jasonandscott.

com.